With EPS Growth And More, Synectics (LON:SNX) Makes An Interesting Case
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Synectics (LON:SNX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Synectics with the means to add long-term value to shareholders.
How Fast Is Synectics Growing Its Earnings Per Share?
In the last three years Synectics' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Synectics' EPS shot up from UK£0.18 to UK£0.26; a result that's bound to keep shareholders happy. That's a commendable gain of 44%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Synectics remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 21% to UK£65m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
See our latest analysis for Synectics
Synectics isn't a huge company, given its market capitalisation of UK£40m. That makes it extra important to check on its balance sheet strength.
Are Synectics Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
In the last twelve months Synectics insiders spent UK£20k on stock; good news for shareholders. While this isn't much, we also note an absence of sales. We also note that it was the Independent Non-Executive Director, Andrew Lockwood, who made the biggest single acquisition, paying UK£20k for shares at about UK£3.00 each.
Should You Add Synectics To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Synectics' strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. In essence, your time will not be wasted checking out Synectics in more detail. You should always think about risks though. Case in point, we've spotted 1 warning sign for Synectics you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Synectics, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.